Archive for November, 2016

U.S. home prices have climbed back above the record reached more than a decade ago, bringing to a close the worst period for the housing market since the Great Depression and stoking optimism for a more sustainable expansion.

The average home price for September was 0.1% above the July 2006 peak, according to the S&P CoreLogic Case-Shiller U.S. National Home Price index released Tuesday. As of the previous month’s reading of the Case-Shiller index, a widely used benchmark for U.S. housing, prices remained 0.1% below the July 2006 record.

Adjusted for inflation, the index still is about 16% below the 2006 high. Home prices jumped 5.5% over the past year.

One version of this instrument is already in the final stages of legislation in France (see “DBRS: Rating the New French Senior Non-preferred Debt Instruments,” published on November 22, 2016). By introducing this instrument across Europe, the EC’s intention is to try to introduce greater harmonisation in the creditor hierarchy in Europe at a time when the regimes of different countries are diverging (e.g. the German subordination of existing traded senior debt which will be in place from January 2017).

In its recent commentary DBRS has already clarified that it intends to rate the French non-preferred senior debt instrument one notch below the bank’s Intrinsic Assessment (IA), based on the DBRS Criteria: Rating Bank Capital Securities – Subordinated, Hybrid, Preferred & Contingent Capital Securities. At the same time, DBRS currently rates existing subordinated debt at European banks generally at one notch below the IA for dated subordinated debt and cumulative junior subordinated debt, but two notches below the IA for non-cumulative junior subordinated debt. However, given the increasing likelihood that all subordinated debt will be used to absorb losses alongside equity as the implementation of BRRD (Bank Recovery and Resolution Directive) evolves, DBRS expects to see negative rating pressure on the subordinated debt that is currently rated only 1 notch below the IA, and which is at the same level as potential future issuance of nonpreferred senior debt. One possible outcome of DBRS’s deliberations is that these instruments would be downgraded to the same level as existing non-cumulative junior debt (i.e. 2 notches below the IA).

These developments are currently restricted to Europe. DBRS does not see similar rating pressure on rated subordinated in the US, Canada or Asia, given the different regulatory regimes in these countries.

HIMIPref™ Preferred IndicesThese values reflect the December 2008 revision of the HIMIPref™ IndicesValues are provisional and are finalized monthly

has today upgraded the rating on the Preferred Shares issued by Life & Banc Split Corp. (the Company) to Pfd-3. In October 2006, the Company raised gross proceeds of $300 million by issuing 12 million Preferred Shares at $10 each and an equal number of Class A Shares at $15 each. Since then, the Company has completed several additional treasury offerings. The redemption date for both classes of shares issued is November 29, 2018. The board of directors may extend the Company’s term and the shares by successive terms of up to five years, provided that shareholders are given an optional retraction right at the end of each successive term.…Although the performance of the Portfolio has experienced some volatility over the past year, the downside protection has shown a steady recovery in the last four months. It stands at 47.7% as of November 17, 2016. The dividend coverage ratio is about 1.1 times (x).

In response to overwhelming public demand (SafetyinNumbers asked me), I present a chart of Canada Prime and the interest-equivalent yield of Floaters.

Click for Big

There are problems with this chart:

Often, Floaters have traded above their contemporary call price. When this has happened I have set the interest-equivalent yield to zero.

In late years, the Floater index has been dominated by BAM issues, which often trade differently from the market as a whole due to credit worries and investor concentration concerns.

In later years, PWF.PR.A has drifted in and out of the index, relegated intermittently to Scraps on volume concerns. As PWF.PR.A has a significantly lower yield than the BAM Floaters, this creates inconsistencies when comparing one period to another.

At the beginning of February, 2011, I abruptly changed the interest-equivalency factor from 1.4x to 1.3x

HIMIPref™ Preferred IndicesThese values reflect the December 2008 revision of the HIMIPref™ IndicesValues are provisional and are finalized monthly

that it has closed its previously announced public offering of Cumulative Redeemable Minimum Rate Reset Preference Shares, Series 17 (the “Series 17 Preferred Shares”) by a syndicate of underwriters led by TD Securities Inc., CIBC Capital Markets, Scotiabank, and RBC Capital Markets. Enbridge issued 30 million Series 17 Preferred Shares for gross proceeds of $750 million. The Series 17 Preferred Shares will begin trading on the TSX today under the symbol ENB.PF.I. Proceeds are expected to be used to partially fund capital projects, to reduce existing indebtedness and for other general corporate purposes of the Company and its affiliates.

ENB.PF.I is a FixedReset 5.15%+414M515, announced November 15. It will be tracked by HIMIPref™ and has been added to the Scraps index due to credit concerns.

The issue traded 1,825,658 shares today in a range of 24.85-00 before closing at 24.95-96, 20×16. Vital statistics are:

that it has entered into an agreement with a syndicate of underwriters led by BMO Capital Markets, CIBC World Markets, National Bank Financial, RBC Capital Markets and TD Securities. The underwriters have agreed to buy 4,000,000 Cumulative 5-Year Minimum Rate Reset Preferred Shares, Series A (the “Series A Preferred Shares”) at a price of $25.00 per share for aggregate gross proceeds of $100,000,000. The proceeds are expected to be used to originate and finance, directly and indirectly, finance assets and for general corporate purposes.

ECN Capital has granted the underwriters an option to purchase at the offering price up to an additional 2,000,000 Series A Preferred Shares exercisable, in whole or in part, at any time up to 48 hours prior to closing of the offering. Should the option be fully exercised, the total gross proceeds of the Series A Preferred Share offering will be $150,000,000.
The Series A Preferred Shares will be issued to the public at a price of $25.00 per share and holders will be entitled to receive fixed cumulative preferential cash dividends, payable by quarterly installments for an initial period of five years, as and when declared by the Board of Directors of the Corporation, at a rate of $1.625 per share per annum, to yield 6.50% annually. Thereafter, the dividend rate will reset every five years to the sum of the then current 5-Year Government of Canada Bond yield and 5.44%, provided that, in any event, such sum shall not be less than 6.50%. On December 31, 2021, and on December 31 of every fifth year thereafter, the Corporation may redeem the Series A Preferred Shares in whole or in part at par.

Holders will have the right to elect to convert all or any of their Series A Preferred Shares into an equal number of Cumulative Floating Rate Preferred Shares, Series B (the “Series B Preferred Shares”) on December 31, 2021, and on December 31 of every fifth year thereafter. Holders of the Series B Preferred Shares will be entitled to receive quarterly floating rate cumulative preferential cash dividends, as and when declared by the Board of Directors of the Corporation, equal to the sum of the then current 3-month Government of Canada Treasury Bill yield and 5.44%. On December 31, 2026 and on December 31, of every fifth year thereafter (a “Series B Redemption Date”), the Corporation may redeem the Series B Preferred Shares in whole or in part at par. On any other date that is not a Series B Redemption Date after December 31, 2021, the Corporation may redeem the Series B Preferred Shares in whole or in part by the payment of $25.50 for each share to be redeemed.

The offering is being made only in the provinces of Canada by means of a prospectus supplement to the Corporation’s base shelf prospectus. The closing date of the offering is expected to be on or about December 2, 2016.

“We see growth opportunities in the North American specialty finance market that we believe can offer very attractive returns for a non-bank participant with sector expertise and an investment-grade balance sheet,” said Steven Hudson, ECN Capital’s CEO. “The proceeds from this Offering bring these growth opportunities closer to hand by adding to the capacity, quality and depth of our current capital structure,” added Mr. Hudson.

DBRS, Inc. (DBRS) has today assigned a rating of Pfd-3 (low) to the C$100 million Cumulative Five-Year Minimum Reset Preferred Shares, Series A (the Preferred Shares) issued by ECN Capital Corporation (ECN or the Company). The trend on the Preferred Shares is Stable. The proceeds from the Preferred Shares will be included in the general funds of ECN and available for general corporate purposes.…While near-term upward ratings migration is unlikely, over the medium-term, ratings could be positively impacted by a successful execution on the “asset-lite” strategy while maintaining asset quality within expectations and balance sheet leverage at current levels. Sustained earnings expansion that is supported by a more balanced mix of revenues would also be viewed positively by DBRS. A more balanced funding profile and lower asset encumbrance resulting in improved financial flexibility would be viewed favorably. Conversely, a noteworthy increase in leverage, sustained deterioration in operating performance, or indications of miss-steps in the execution of the “asset-lite” strategy evidenced by loss of key customers or operational-related charges could result in negative ratings pressure. Ratings could also be pressured by a material acquisition that DBRS views as outside of ECN’s core verticals and capabilities.

that it has completed its offering of 19 million Non-cumulative Rate Reset Class 1 Shares Series 23 (the “Series 23 Preferred Shares”) at a price of $25 per share to raise gross proceeds of $475 million.

The offering was underwritten by a syndicate of investment dealers co-led by RBC Capital Markets, BMO Capital Markets and Scotiabank. The Series 23 Preferred Shares commence trading on the Toronto Stock Exchange today under the ticker symbol MFC.PR.R.

The Series 23 Preferred Shares were issued under a prospectus supplement dated November 15, 2016 to Manulife’s short form base shelf prospectus dated December 17, 2015.

MFC.PR.R is a FixedReset, 4.85%+383, announced November 14. The issue will be tracked by HIMIPref™ and has been assigned to the FixedReset subindex.

As this issue is from an insurer and there is no provision for conversion into common shares at the option of the issuer, I consider this to be subject to my Deemed Retraction policy; accordingly I have placed a maturity entry dated 2025-1-31 at par in the call schedule of this instrument for analytical purposes. Note that this approach is due to analysis and there is no contractual provision in the terms of issue for any such maturity.

The issue traded 989,738 shares today in a range of 24.68-90 before closing at 24.84-89, 5×74. Vital statistics are:

Yield Calculation Conventions

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